UK productivity a bit stronger than thought using new measure, ONS says

ONS Finds UK Productivity Growth Higher Than Previous Estimates

Revised Productivity Estimates and Their Implications

LONDON, Sept 17 (Reuters) - Britain's underlying economic performance appears to have been a bit stronger than previously estimated, the country's statistics office said on Thursday, citing a new methodology for measuring productivity.

New Methodology for Measuring Productivity

The Office for National Statistics said an experimental approach to estimating changes in productivity showed growth in output per hour averaged 1.3% a year between 1997 and 2024.

That compared with 1.1% growth under the ONS's current approach which is based the ONS's flagship Labour Force Survey (LFS) which has been plagued with low response levels since the COVID-19 pandemic.

Key Factors Behind the Change

The biggest factor behind the change was a cut to the estimate of the hours worked, the ONS said.

Output per hour was estimated to be almost 41% higher than in 1997 under the new approach, compared with 34% under the current one.

Impact on Economic Growth Estimates

The new estimates did not affect the estimates of overall economic growth, the ONS said.

The new methodology - which will replace existing UK labour productivity statistics from November - uses tax office data on the number of people in payrolled employment alongside a jobs survey sent to employers by the ONS among other inputs.

Broader Economic and Policy Context

Successive British governments have promised to boost productivity to speed up the economy, improve living standards and ease some of the pressure on the public finances.

Last year, the country's budget forecasters cut their estimate of future productivity growth, dealing a blow to then finance minister Rachel Reeves as it resulted in a reduction in expected growth and tax revenues.

Expert Opinions and Alternative Measures

Economists have previously said Britain's productivity record might not be as weak as the official measure suggested and could be turning a corner.

Last month, the Resolution Foundation, a think tank, said its measure of productivity showed annual growth in output per hour averaged 1.1% over ​the two years to the end of June 2026, up from an annual decline of ⁠0.7% in the two previous years.

ONS Commentary on the Productivity Puzzle

Cliodhna Taylor, head of productivity statistics at the ONS, said Thursday's estimates reduced the size of Britain's productivity slowdown by around half in the decade before the COVID pandemic.

"However, overall, the 'productivity puzzle' remains, albeit more muted than before, as these data still point to a fundamental shift in the UK economy following the financial crisis" of 2007-08, Taylor said in a blog post.

Article Credits

(Writing by William Schomberg; editing by Suban Abdulla)